Next Generation Supply Management Defined

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Monthly Archives: March 2007

Ev’rybody’s looking for a perfect world where you could save everything your heart desires. A perfect buy will happen every time and the perfect order will set your world on fire.

What you gonna do when one and one makes three? And a vision of the future is impossible to see. Nobody’s perfect not even a perfect fool but if you’ll use sourcing tools reductions will find you.

Ain’t no saving in a perfect worldthere ain’t no perfect world anyway.Ain’t no saving in a perfect worldbut we’ll keep on dreaming of getting to a perfect world.Keep on dreaming of getting to a perfect world.

Everybody’s got targetsyou know that it’s true.They’ll RFX me and they’ll e-Aucton you.Something happens to the pledges of trustdown through the years they begin to rust.

Now here we are amid the chaos and rising tidesstill waiting for our agreements to save our hides.We’ll keep on fighting as long as we cantry to remember and understand.

Ain’t no saving in a perfect world.Ainlt no saving in a perfect world.

Keep on dreaming of getting to a perfect world.Keep on dreaming of getting to a perfect world.Keep on dreaming of getting to a perfect world.

Given the recent supply chain failure of Imperial Oil, as laid out by David Rotor over on the Procurement Investor blog (which is still being felt by many Canadians who saw gas prices spike 35% in some places), I think it is worth pointing out an AMR Research article from January that noted that we are in times of unique economic and environmental changes and that the current political and economic environment is a dynamic that we have not seen since 1880, echoing Newsweek International editor Fareed Zakaria, which has created a paradox that, according to the article, most economists are not getting right.

Global growth is fueling capitalism which is fueling demand. But these

demand shocks are dampening political changes and their effects. Thus

changes in government structures, civil unrest, and natural disasters are not

having the normal impact and are creating unusual market behavior.

Countries and companies have greater interdependencies economically and

environmentally than we have ever seen before. And some 1.5 billion people

have been added recently as consumers in global markets, which is creating

rampant capitalism along with the formation of anti-capitalist islands with

strong nationalism. The result: an economic climate that includes a new

type of risk and impending uncertainty.

According to Mr. Zakaria, the paradox will only widen. Largely due to China, with its 1.3 billion people and its current growth rate of 9.5% over the last 30 years. Furthermore, supply chain professionals can no longer depend solely on political infrastructure as the primary framework for global trade. Business must shoulder more burden for economic and environmental issues as they enter global markets.

But there is a fix. Invest in two-way processes in supply chain relationships, build collaborative relationships with a foundation of strong win-win value propositions, and recognize cultural differences. This is backed up with examples that include McDonalds, Dow, IBM, PepsiCo, and Toyota.

And finally, don’t overlook risk. Look for it, analyze it, come up with ways to prevent against it, and have backup plans in case it happens anyway.

Today I make my first nomination to the Pros You Should Know – But Don’t – List. The blogger’s supplement to the incomplete Supply & Demand Executive List. That individual is Jean-Philippe Massin, former CEO of Eutilia, and editor of www.massin.nl=”” esourcing=”” target=”_blank”>Strategic Sourcing | Europe. Jean-Philippe is one of the few bloggers on the other side of the Atlantic working hard to spread the Spend Management message over in Europe and needs to be recognized for that commitment.

Although not a common topic for this blog (as my only post focussed on the topic to-date discussed The Dismal State of US Health Care), it is an important one, and a favorite of vendors like VendorMate and CombineNet. I don’t know of a single country where health care is not as good as it could be, and should be.

A premise of the article is that, in health-care, regulators struggle to reconcile three competing objectives: equitable access, high quality, and low cost. Furthermore, increased supply creates additional demand for care and often fails to generate commensurately better outcomes and higher spending does not necessarily correlate with higher-quality health care. And without a comprehensive perspective, a remedy for one aspect of the health care system might generate unintended – and potentially negative and costly – implications for another part.

The authors contend that the development of a comprehensive perspective requires a framework to help guide decision making. To this end, they identified the primary elements of supply and demand and derived six principles that apply to a broad spectrum of health care systems. Furthermore, they derived a seventh principle, concerning the organizational and operational framework necessary to implement the concepts.

Build and organize capabilities of intermediaries to enable them to effectively manage the system.

With respect to each of these principles, they then define levers, or implementations, that can be used to achieve the principles. Furthermore, they also outline three main approaches to shape demand and supply: awareness, incentives, and mandates; under the pretext that local differences in health care systems need not preclude a structured, systematic approach to reform based on enduring, universal principles.

What I do not understand is why it needs to be so hard. For instance, why would not the following four principles cut it:

Insure that treatment services are available to anyone who needs them. (Emergency and Life-Threatening services.)

After insuring patients get the critical care they need, the next priority should be to prevent illness and injury in the first place.

Be fiscally responsible in the delivery of health care services.

Allow for a private, or semi-private, system in addition to a public system for alternate service provision, including provision of non-essential services.

For example, my point (3) would subsume (2), (3), (5), and (6); my point (2) would subsume point (1); my point (4) would subsume point (7); and my point (1) would seem to be the most critical of all – service is there when you need.

Now I know that it is difficult to define need, since each of us could define it differently, but I do not see why it is so difficult to bring healthcare into the twenty-first century. But then again, I do not understand how your average political system and politician can be so useless either. I guess I’m still too much of a mathematician at heart.

When I was down in the valley, I made a point to visit Santa Clara to catch up with Ketera, who recently announced their next generation spend analysis solution, which I’m not going to spend too much time talking about (even though they are getting a good reception and a lot of customers because of it).

I did get a chance to see it recently, and it’s quite good. It’s not the absolute best in any regard (automatic classification, reporting, flexibility, etc.), but the overall solution puts it in the short stack of solutions you should definately be including in your review process. They have a two-tier classifier, which starts off with what they call a high-confidence classifier (which, you guessed it, is based on the old GL Codes, Vendors, GL Codes and Vendors mapping) and a trio of lower-level lower confidence classifiers (that use various rules and external sources) to try and collectively get a high confidence match. Failing that, they have manual classification and a rules engine to automate the match in the future. They also have a tierd knowledge base: global, industry, and organization to allow for multi-level rules and classification. Their reporting solution is now based on MicroStrategy, which, besides giving you standard best of breed reports, allows a user to fairly easily build basic BI reports and drill down within current reports. And it’s on-demand. (So, in recap, they potentially have one of the best classifiers, one of the better reporting front-ends from a usability perspective, and it’s on-demand.)

My interest, and the focus of my California conversation was what they were doing with their e-Procurement, Invoice Management, and what they are doing to enable the Procure-to-Pay (P2P) cycle; their recent partnership agreement with Hyperion (which was just acquired by Oracle) and their progress towards delivering operational Business Intelligence capabilities; and their supplier enablement (and catalog hosting) services and solutions.

At the moment, their procurement solution is one of the better enterprise solutions out there – it’s usable and it interfaces with their Invoice Management Solution and Supplier Management Portal. They have a two-level checkout process, basic and advanced, since most organizational users will use the system ony once a month and need a simple solution, and they have integrated document management. Furthermore, a future release will include Hyperion reporting.

My rationale for this interest is that it appears that there are significantly fewer general-purpose e-Procurement solutions than general-purpose strategic sourcing solutions (even though there are a lot of niche offerings, especially in the Software-as-a-Service arena); even though there are a lot of Business Intelligence solutions and a lot of dashboard solutions, not many attempt to tie together operational metrics with their financial impacts; and even though there are a growing number of supplier management and supplier information management solution, not many support the quick enablement of a large number of suppliers and I wanted to know how close Ketera had come to achieving each of these goals. That’s why I was glad to hear that they were working on tieing in their invoice management and procurement solutions with their contract management solutions, that they were working on Hyperion integration, and that they have a few other surprises for the year ahead. After all, once you have this, you just add better integration with spend analysis, and you have a great start at an integrated procurement and sourcing application that would be a great solution for many underserviced mid-market firms.